Members of the Managing Committee of Shri Una Taluka Sahakari Kharid Vechan Sangh Ltd. and ors.

Cases Referred

Collector of Customs v. Sampathu Chetty

Excerpt:.....forming part of the contract of service. it is clear from this decision that bye-laws of a co-operative society do not have force of a statute and like articles of association of a company they constitute a contract between the parties. 1969 supreme court 1396. if has been observed by the supreme court in that decision that it is well understood that a mandamus lies to secure the performance of a public duty or statutory duty in the performance of which the one who applies for it has a sufficient legal interest. mehta has taken the view that bye-laws of a co-operative society enjoy the statutory character. the comparison of sub-section (7) of section 28 of the gujarat co-operative societies act, 1961 with some of the provisions of section 25 of the andhra pradesh act which i have..........chillenged by the petitioners-in this petition.3. the sangh is governed, apart from the gujarat co-operative societies act, 1961 and the rules made thereunder, by its bye-laws. mr. vakharia has relied upon bye-law 35g of the sangh in order to contend that the impugned resolution is invalid and contrary to that bye-law. bye-law 35g reads as follows:the term of the member of the managing committee shall be considered as vacant prior to the expiry of that term on account of the following reasons:(k) by tendering resignation in writing(kh) removal by the general body on account of sufficient reasons and by majority,(g) if one remains absent in three consecutive meetings without taking the permission from the committee.it is not in dispute before me that the petitioners had remained absent.....

Judgment:

S.H. Sheth, J.

1. The petitioners were the members of the Managing Committee of Una Taluka Sahakari Kharid Vechan Sangh Ltd. At Una in Junagadh District (hereinafter referred to as 'the sangh' for the sake of brevity). Petitioners Nos. 2 and 3 were elected as members of the managing committee in September 1972. Petitioner No. 1 was elected as a member in September 1973. The term of office is three years from the date of election. On 24th August 1974 the managing committee of the sangh passed the impugned resolution resolving that the petitioners had remained absent from three consecutive meetings of the managing committee held on 18th July 1974, 23rd July, 1974 and 15th August 1974 and that therefore their offices had become vacant. The managing committee of the sangh thereafter co-opted three members in their places.

2. It is this resolution which is chillenged by the petitioners-in this petition.

3. The sangh is governed, apart from the Gujarat Co-operative Societies Act, 1961 and the rules made thereunder, by its bye-laws. Mr. Vakharia has relied upon bye-law 35G of the sangh in order to contend that the impugned resolution is invalid and contrary to that bye-law. Bye-law 35G reads as follows:

The term of the member of the managing committee shall be considered as vacant prior to the expiry of that term on account of the following reasons:

(k) by tendering resignation in writing

(kh) removal by the general body on account of sufficient reasons and by majority,

(g) if one remains absent in three consecutive meetings without taking the permission from the committee.

It is not in dispute before me that the petitioners had remained absent from the aforesaid three meetings without obtaining the permission of the committee. What Mr. Vakharia has contended before me is that the three meetings of the managing committee on the dates on which they were held were not independent meetings but were adjourned meetings. According to him, a meeting which is adjourned for want of quorum to some other day is no meeting at all because, according to him, a meeting is one which is duly and validly constituted. In other words, if a meeting is held on a particular day when there is no quorum and if it is adjourned to some other day they do not constitute two meetings.

4. Mr. Raval who appears on behalf of Respondent No. 2 has raised a preliminary objection to the maintainability of this petition. According to him, bye-laws of a co-operative society constitute contract between the parties and therefore, they cannot be enforced by a writ of this court. In other words, it is not open to this Court to issue a writ to enforce a contractual obligation. In support of his contention, he has invited my attention to the decision of the Supreme Court in Co-Operative Central Bank Ltd, and Ors. v. Additional Industrial Tribunal, Andhra Predesh. Hyderabad and Ors. : (1969)IILLJ698SC . It was a case in which an industrial dispute arose between 25 Co-operative Central Banks in the state of Andhra Pradesh and their workmen represented by the Andhra Pradesh Bank Employees Federation, Hyderabad. It was referred by the Government of Andhra Pradesh to the Industrial Tribunal, Hyderabad, under Section 10(1)(d) of the Industrial Disputes Act, 1947. The tribunal and the High Court rejected the plea taken on behalf of the banks and expressed the view that the disputes Actually referred to the tribunal were not capable of being decided by the registrar of the co-operative societies under Section 61 of the Andhra Pradesh Co-operative Societies Act, 1964 and that, therefore, the reference made to the industrial tribunal under the Industrial Disputes Act was competent. In order to appreciate this contention raised on behalf of the banks, the Supreme Court examined, the provisions of Sections 16, 61, 62 and 133 of the Andhra Pradesh Act. It was in that context that the bye-laws of the Co-operative Banks came up for consideration. A contention was raised challenging the jurisdiction of the industrial tribunal to decide the dispute relating to the conditions of service on the ground that the conditions of service where laid down by bye-laws and were therefore, statutory. Therefore, an industrial tribunal was not competent to alter them because it has no jurisdiction to make orders contrary to law. It was contended in that context on behalf of the banks that the bye-laws, which laid down the conditions service, were themselves law and that, therefore, no direction could be issued by the industrial tribunal, altering those conditions of service because such a direction would be contrary to law and, therefore, illegal. It is in that context that the Supreme Court examined the nature and character of the bye-laws of a co-operative society. This is what has been observed by the Supreme Court in that behalf.

We are unable to accept the submission that the bye-laws of a co-operative society framed in pursuance of the provisions of the Act can be held to be law or to have the force of law. It has no doubt been held that, if a statute gives power to a Government or other authority to make rules, the rules so framed have the force of statute and are to be deemed to be incorporated as a part of the statute. That principle, however, does not apply to bye-laws of the nature that a co-operative society is empowered by the Act to make. The bye-laws that are contemplated by the Act can be merely those which govern the internal management, business or administration of a society. They may be binding between the persons affected by them, but they do not have the force of a statute. In respect of bye-laws laying down conditions of service of the employees of a society, the bye-laws would be binding between the society and the employees just in the same manner as conditions of service laid down by contract between the parties. In fact, after such bye-laws laying down the conditions of service are made and any person enters the employment of a society those conditions of service will have to be treated as conditions accepted by the employee when entering the service and will thus bind him like conditions of service specifically forming part of the contract of service. The bye-laws that can be framed by a society under the Act are similar in nature to the articles of association of a company incorporated under the companies Act and such articles of association have never been held to have the force of law. In a number of cases, conditions of service for industries are laid down by standing orders certified under the industrial employment (standing orders) Act, 1946, and it has been held that, though such standing orders are binding between the employers and the employees of the industry governed by these standing orders, they not have such force of law as to be binding on industrial tribunal adjudicating an industrial dispute.

It is clear from this decision that bye-laws of a co-operative society do not have force of a statute and like articles of association of a company they constitute a contract between the parties.

5. The next decision to which Mr. Raval has invited my attention is in Praga Tools Corporation v. C. Imanual and Ors. A.I.R. 1969 Supreme Court 1396. If has been observed by the Supreme Court in that decision that it is well understood that a mandamus lies to secure the performance of a public duty or statutory duty in the performance of which the one who applies for it has a sufficient legal interest. In other words, the condition precedent for the issue of mandamus is that there is in one claiming it a legal right to the performance of a legal duty by one against whom it is sought. The Supreme Court has further observed in that decision that a company is a non-statutory body incorporated under the companies Act. There is neither a statutory nor a public duty imposed on it by a statute in respect of which enforcement can be sought by means of a mandamus nor is there in its workmen any corresponding legal right for enforcement of any such statutory or public duty. As a company incorporated under the Co-operative Societies Act both stand on the same footing if a company is not a statutory body against which a mandamus lies it also cannot lie against a co-operative society.

6. A similar question arose before Mr. Justice D.A. Desai in Special Civil Application No. 1636 of 1969 decided by him on August 5, 1970. Kalabhai Hamirbhai Solanki v. Umarkantha Sahkari Khana Udyog Ltd. and Ors. One of the contentions which was raised on behalf of the respondents in that case was that no mandamus could lie against a co-operative society because the bye-laws of a co-operative society constitute a contract between the members and the society and they have the same effect as articles of association of a company and have no force of law. In that case the petitioner had prayed for a writ of quo warranto or information in the nature of quo warranto calling upon respondents Nos. 2 to 19 to show cause how they hold office of the board of directors of the society, Respondent No. 1 to that case. It has been observed in that decision that a writ of quo warranto will lie if there is a public office of a substantive character and that the gist of the writ of quo warranto is that it can be directed against the usurper of a public office. It has been held in that case that the petitioner could not ask for a writ of quo warranto because respondents Nos. 2 to 19 to that petition were not holding any public office. It was urged in that context that the bye-laws of a co-operative society have no force of law and that they merely constitute a contract, any contravention or breach of which cannot be the subject matter of a petition under Article 226. It was next urged that a right arising purely out of a contract cannot be enforced against another party to the contract by a petition under Article 226 of the constitution. As against these arguments it was contended that the bye-laws of a co-operative society do not constitute a contract between the members but have a statutory force. Mr. Justice D.A. Desai examined in that decision the relevant provisions of the Gujarat Co-operative Societies Act, 1961. He inter alia referred to Section 74 of the Gujarat Co-operative Societies Act, 1961. He also referred to the relevant rules made under the Gujarat Co-operative Societies Act, 1961. Having observed that the articles of association of a company have been held to be a contract between each member and the company he has stated that if there is no difference between the articles of association of a company and bye-laws of a society on a parity of reasoning the bye-laws of the society will also constitute a contract between the members and the society. He has relied in that context upon the decision of the Supreme Court in the Case of Co-operative Central Bank ltd. (supra) and reproduced therefrom the relevant passage. The final conclusion which he has recorded on the question is as follows:

Therefore, even after examining various provisions of the guajrat Co-operative Societies Act, the conclusion is inescapable that the bye-laws of a society registered under the Act are not statutory in character and have no force of law and they are on par with the articles of association and they constitute a contract between the members and the society.

Having taken that view he has further observed that if the bye-laws of a society do not have the force of a statute, any obligation arising therefrom cannot be enforced by a petition under Article 226.

7. The next decision to which my attention has been invited by Mr. Raval is in special civil applications No. 1005 to 1965 and 1531 of 1965 decided on April 24/25, 1972 by a division bench of this Court consisting of P.N. Bhagwati C.J. and D.A. Desai, J. The Gujarat State Co-Op. Bank Ltd. V. Ahmed. District Banks State Union and Ors. In that case, Gujarat State Cooperative Bank Ltd. and the Ahmedabad Peoples Co-operative Bank Ltd., challenged the validity of a reference made to the Industrial Court under Section 70B(a) of the Bombay industrial relations Act, 1947 for adjudication of certain demands set out in the reference. One of the contentions raised in that case was that on the repeal of the Bombay Co-operative Societies Act, 1925, by the Gujarat Co-operative Societies Act, 1961, the bye-laws, especially those prescribing conditions of service framed by the petitioner society in that case under the repealed Act were deemed to be rules enacted under Section 76 read with Section 169 of the Gujarat Co-operative Societies Act 1961 and since the rules have the force of law, industrial court will have no jurisdiction to Act contrary to law and therefore it cannot entertain the reference. The question which was examined in that case was whether the bye-laws of a co-operative society which prescribe conditions of service can be deemed to be rules enacted under the Act. Relevant sections of the Gujarat Co-operative Societies Act, 1961 and to the Bombay Co-operative Societies Act, 1925 were examined by this Court in that decision. Having done so, this Court has expressed the view that it was not possible to accept the submission that bye-laws enacted under the repealed Bombay Act would be deemed to be continued as rules enacted under Section 76 of the Gujarat Act. The view which this Court has expressed in that decision on the nature and character of the bye-laws of a co-operative society is that they do not have the statutory force.

8. As against these decisions Mr. Vakharia has invited my attention to the decision of Mr. Justice J.B. Mehta in Lambha Vividh Karyakarl Seva Sahakari Mandli Ltd. Ahmedabad and Anr. v. District Registrar, Co-op. Societies (Rural). Ahmedabad and Ors. 14 Gujarat Law Reporter 786. A similar question arose in that decision. Mr. Justice J.B. Mehta has taken the view that bye-laws of a co-operative society enjoy the statutory character. The contention which was raised before him was that the bye-laws of a cooperative society including the election bye-laws have a contractual origin and are, therefore, binding on the members by reason of that contract and that, therefore, they have no binding effect as a law nor do they have the force of law. The decisions of the Supreme Court in The Co-operative Central Bank Ltd. (supra) and in Praga Tools Corporation (supra) were cited before him. Lie distinguished the aforesaid two Supreme Court decisions and it is from that distinguishment that the reasons which have led him to come to has contrary conclusion flow. The first reason which has weighed with him is that the Supreme Court has never held that even when these bye-laws are referred to in the statute so as to incorporate them in the statutory control laid down under the Act, they do not impose any statutory obligations. In other words, a bye-law which is referred to in a statute is, according to him, incorporated in the statutory control of the Act and therefore creates a statutory obligation and has a statutory force. He has then referred to Sub-section (7) of Section 28 and observed that it categorically enacts that the voting right of a member of a federal society shall be regulated by the rules and' by the bye-laws of the society. In that view of the matter, he has further observed that if the voting rights are sought to be interfered with otherwise than as prescribed by these regulatory measures, it is not that bye-law which is contravened but it will be an Action ultra vires Section 28(7). He has also relied upon Section 74 which provides that the management of every society shall vest in a committee, constituted in accordance with this Act the rules and bye-laws, and that it shall exercise such powers and perform such duties as may be conferred or imposed on it respectively by the Act the rules and the bye-laws. It in terms lays down how the management of a co-operative society shall be carried on under the Act-management which is vested in a committee. It also provides how such committee shall be constituted in accordance with the Act, rules and the bye-laws. According to him, therefore, it is obvious that a committee which is not constituted in accordance with the Act, rules and bye-laws, or in accordance with the statutory mandate will not be the committee which can claim powers of management. According to him, Section 74 further provides that the committee which is so constituted for the management of a society shall exercise such powers and perform such duties as may be conferred or imposed on it respectively by the Act, rules and the bye-laws. Therefore, in his view, Section 74 not only creates the committee of management under the Act but defines its powers and duties. Proceeding further with this line of reasoning he has made the following observation.

These powers and duties must be treated as statutory powers and statutory duties and a committee which exercises such statutory powers and statutory duties must fulfil the test of a statutory authority. It is true that the bye-laws had their origin in the contract and they had to be registered under Section 9(b) by the registrar if they are found in conformity with the Act and the rules. If they were not so found, the registrar shall have the power to direct the society to amend such bye-laws so as to bring them in conformity with the Acts and the rules.

He has then relied upon the definition of 'bye-laws' given in Sub-section (2) of Section 2 and observed that a bye-law includes registered amendments of such bye-laws including the compulsory amendment made under Section 14. The final conclusion which he has recorded, therefore, is that to the extent to which these bye-laws are in terms referred to in any provision of the Act, they are re-written in the section and section cannot be read without the language of the bye-laws being re-written therein. In that connection he has referred to the decision of the Supreme Court in Collector of Customs v. Sampathu Chetty : 1983ECR2198D(SC) in which Supreme Court has pointed out the distinction between a mere reference to or a citation of one statute in another and an incorporation which in effect means the bodily lifting of the provisions of one enactment and making it a part of another so much so that the repeal of the former leaves the letter wholly untouched. It is not necessary to make any detailed reference to the principle of incorporation which has been dealt with in that decision.

9. The two decisions of the Supreme Court referred to above have been distinguished by Mr. Justice J.B. Mehta on the ground that the bye-laws of a co-operative society governed by the Gujarat Co-operative Societies Act, 1961 have a statutory force by virtue of Sub-section (7) of Section 28 and Section 74 of the Act. The decision of the Supreme Court in Co-operative Central Bank Ltd. (supra) is based upon the provisions of the Andhra Pradesh Co-operative Societies Act, 1964. It would have been appropriate for him if he had examined the scheme of the Andhra Pradesh Act and tried to find out whether the Andhra Pradesh Act contains provisions corresponding to Sub-section (7) of Section 28 and Section 74 of the Gujarat Co-operative Societies Act, 1961. If the Andhra Pradesh Act contains similar provisions and yet if the Supreme Court has recorded that decisions in Co-operative Central Bank Ltd. (supra), really there would have been no ground for distinguishing it in relation to the Gujarat Co-operative Societies Act, 1961. If the Andhra Pradesh Act does not contain similar provisions the distinction which Mr. Justice J.B mehta has made will assume much greater significance. Section 31 of the Andhra Pradesh Act correspondent to Section 74 of the Gujarat Co-operative Societies Act, 1961. The material part of Section 31 of the Andhra Pradesh Act reads as follows:

(1) the general body of a society shall constitute a committee in accordance with the bye-laws and entrust the management of the affairs of the society to such committee.

(2)(a) the term of office of the committee shall be for such period, not exceeding two years, as may be specified in the bye-laws.

(b) notwithstanding anything in Clause (a), if for any reason the election of the members of the committee is not held by the time of the expiration of the term of the existing committee, the registrar may. For reasons to be recorded m writing direct that the term of office of that committee shall extend upto such time as such election is held, which extension shall not ordinarily exceed one year.

(3) the election of the members of the committee shall be in such manner as may be prescribed.

Analysing these provisions of Section 31 of the Andhra Pradesh Act it becomes hear that the constitution of a committee of management is directed to be done by Section 31. Section 31 further lays down that it shall be constituted in accordance with the bye-laws. It is not necessary to state that there cannot be a bye-law which is contrary to the Act or the rules. Sub-section 2(a) of Section 31 of the Andhra Pradesh Act prescribes by statute the maximum period of the term of office of the committee of management-1 tars leaving it to the bye-laws to specify a shorter term if it s so desired by a society. Sub-section 2(b) of Section 31 confers upon the registrar the statutory power of extending the term of a committee of management if he eke sons to it have not been held in time until such time when the elections are held. Sub-section (3) of Section 31 further provides that the elections of the members of the committee of management shall be m be manner prescribed, that is to say, in the manner prescribed by the rules trade under the Act. It is, therefore, quite clear that different provisions made uno impose statutory control of the rules on the committee of management of a co-operative society. Let me now compare Section 74 of the Gujarat Co-operative Societies Act, 1961 with it. It provides as under:

The management of every society shall vest in a committee, constituted in this Act the rules and by-laws, which shall exercise such powers or such duties as may be conferred or imposed on it respectively by this Act, the rules and the bye-laws.

Whereas Section 74 makes an express reference to the Act, the rules and the under Section 31 of the Andhra Pradesh Act makes a clear reference to the rule when it states in Sub-section (3) that the election of the members of he committee shall be held in such manner as may be prescribed and upon the committee or subjects it to the statutory control. It is, therefore, clear that so far as the constitution and working of a co-operative society is concerned, it is not only in Section 74 of the Gujarat Co-operative Societies Act, 1961 that we find statutory control but we also find a similar statutory control imposed upon a co-operative society governed by the Andhra Pradesh Co-operative Societies Act, 1964.

10. The next section which has been pressed into service by Mr. Mehta is Sub-section (7) of Section 28 of the Gujarat Co-operative Societies Act 1961. It provides as under.

The voting rights of members of a federal society shall be regulated by the rule, and by the bye-laws of the society.

We have a corresponding provision in Section 25 of the Andhra Pradesh Act. Sub-section (1) thereof provides as follow:

Every member shall have one vote in the affairs of the society and shall exercise his vote in person and not by proxy.

Sub-section (3) of Section 25 provides as under:

In the case of equality of votes, the chairman of the meeting shall have a second or casting vote.

Sub-section (4) thereof appears to deal with the case of a federal society. It provides as follows:

Notwithstanding anything in Sub-section (1) a society which is a member of another society may, subject to any rules, appoint one of its members to vote on its behalf in the affairs of that other society.

The comparison of Sub-section (7) of Section 28 of the Gujarat Co-operative Societies Act, 1961 with some of the provisions of Section 25 of the Andhra Pradesh Act which I have quoted above clearly show that in matters of voting Section 25 of the Andhra Pradesh Act imposes greater statutory control than Sub-section (7) of Section 28 of the Gujarat Co-operative Societies Act 1961 imposes. Whereas Sub-section (7) of Section 28 merely states that the voting rights of members of a federal society shall be regulated by the rules and by the bye-laws of the society, Section 25 of the Andhra Pradesh Act itself provides for the manner of exercise of his vote by a member of the committee, for resolving a tie where it is created by equality of votes on both the sides and for the manner of voting by a society which is a member of a federal society. Inspite of these provisions which the Andhra Pradesh Act contains the Supreme Court has held that the bye-laws have their origin in a contract and do not partake of statutory element. It is therefore,, difficult for me to accept the proposition that the scheme of the Gujarat Co-operative Societies Act, 1961 is different from the scheme of the Andhra Pradesh Act and that therefore the principle laid down by the Supreme Court in the Co-operative Central Bank Ltd. (supra) does not apply to a co-operative society registered under the Gujarat co-operative societies Act, 1961. I am unable, therefore, with great respect, to accept the principle laid down by Mr. Justice J.B. Mehta in the case of Lambha Vividh Karyakari Seva Sahakari Mandli Ltd., Ahmedabad (supra).

11. In these circumstances, ordinarily I would have referred this case to a division bench. However, it is not necessary for me to do so because the view which I am taking is for tired by the decision of the division bench of this Court referred to above as against the decision of Mr. Justice J.B. Mehta in the case of Lambha Vividh Karyakari Seva Sahakari Mandli Ltd. Ahmedabad (supra). At the time when he decided the aforesaid case he did not have the benefit of the aforesaid decision of the. Division Bench because is was not cited before him.

12. Therefore, relying upon the principle laid down by the division bench of this court in special civil applications Nos. 1005 of 1965 and 1531 of 1955 decided on April 24/25, 1972 and also relying upon the principle laid down by the Supreme Court in the case of Co-operative Central Bank Ltd. (supra) I am of the opinion that the bye-laws of a co-operative society governed by the Gujarat Co-operative Societies Act, 1961 have their origin in contract and, therefore, they cannot be enforced by a writ of this court. In that view of the matter the present petition which has been filed to enforce the bye-laws of Una Taluka Sahakari Kharid Vechan Sangh Ltd. Is not maintainable. I, therefore, uphold the preliminary objection raised by Mr. Raval and dismiss the petition.